The International Trade Committee has today published a
wide-ranging report considering the impacts of COVID-19 on
international trade, the effectiveness of the UK and
international response, and proposals for ensuring supply-chain
resilience.
As the Committee began its inquiry in March, consumer demand had
already plunged as governments implemented lockdowns and citizens
faced the prospect of unemployment. Production was being halted
or reduced in many sectors, impacting supply; and border controls
had combined with trade restrictions and reduced freight capacity
to limit businesses’ ability to ship goods as normal.
In today’s unanimously-agreed report, the cross-party Committee
examines: the impact of the pandemic on global trade; how the UK
Government and international organisations have responded; and
how to ensure future supply-chain resilience. Its recommendations
include:
UK trade in essential goods: pharmaceuticals, medical supplies
and food
UK supply chains in these critical sectors have largely held up
during the pandemic, despite spikes in demand, disruption to
production and freight, and export bans in some countries.
However, the report notes that ‘buffer stock’ of medicines
typically does not stretch beyond six months’ supply. It
therefore urges the UK Government to work with the pharmaceutical
industry to ensure stocks are replenished ahead of a potential
second pandemic wave.
It also recommends the Government consider adjusting intellectual
property provisions to allow for compulsory licensing of
therapeutic drugs or vaccines against COVID-19, as a means of
ensuring they can be made available as quickly, widely and
cheaply as possible.
UK Government response
The report welcomes efforts by UK Export Finance to support UK
businesses trading overseas and the rolling out of ‘bounce-back’
schemes for key sectors.
The Committee highlights the need for improved communication from
the Department for International Trade (DIT) about how it can
support exporters to recover from the pandemic. The Committee
also notes that the pandemic has accelerated the shift to
online-based trade – and calls on DIT to help businesses maximise
related opportunities.
International response
The report expresses concern about the lack of a coordinated plan
of action as regards trade from the international community early
in the pandemic, unlike during the 2008 financial crisis. It
urges the UK Government to act to ensure that temporary
disruptions do not become permanent barriers to trade.
The report praises the emergence of proposals for international
agreements on trade in medical goods and calls for the Government
to assess these and use its influence to seek international
support for such initiatives.
Ensuring future supply-chain resilience and ‘Project Defend’
The Committee urges caution over ‘onshoring’ as a potential
solution to supply-chain vulnerabilities exposed by COVID-19,
warning that it may not be easy to achieve and could replace one
vulnerability with another.
The report calls on the Government to investigate the possible
benefits of ‘parallel supply chains’ for medicines and other
essential goods – building ‘surge capacity’ into UK-based
production.
During the inquiry, the Secretary of State for International
Trade became the first, and so far only, member of the Government
to go on the record about its investigation of supply-chain
vulnerabilities – known as ‘Project Defend’. The Committee calls
on the Government to be as open as possible about the measures it
is considering to address supply chain vulnerabilities. It asks
for clarity about how the Government will balance national
security with its ambition to be a global champion of free trade.
Foreign Direct Investment
The report calls on DIT to step up its efforts in helping inward
investors. The Committee also calls on the Government to set out
its approach to investment agreements in light of issues raised
by the pandemic. Following concerns about predatory investors
taking advantage of the devaluation of assets in the pandemic,
the Committee asks the Government to set out how it will strike a
balance between screening investment for security concerns and
promoting inward investment.
Commenting on the report, Committee chair said:
“The question now facing trade policymakers is not only how to
help economies respond to the damage caused by COVID-19 but also
how to better prepare for a similarly dire scenario in the
future.
“It is a task of intimidating complexity and seeing it through
will require political dexterity. Ensuring supply chain
resilience and access to essential goods needs smart solutions
that avoid falling into the trap of short-sighted protectionism.
“At the same time, the Department for International Trade must
ensure it provides the right support to UK businesses as they
rebuild, as well as leading international efforts to respond to
this disease through coordinated trade policy. Their successes
and failures will affect us all.”
